In the equivalent of a special dollar window for oil marketing companies (OMCs), SBI will sell dollars to the oil companies, who are the single largest buyers of dollars to pay for crude imports, at market rates. The move will ensure that banks don’t quote a higher price to OMCs.
Oil companies have confirmed receiving a letter from the central bank outlining the move, which is expected to have a positive impact on the rupee once demand slackens.
"We are awaiting further clarity on modalities of dollar purchase by oil companies," sources in the State Bank of India told NDTV Profit on condition of anonymity, adding that the OMCs "have not yet come to the bank for direct purcahse route".
"It is difficult to ascertain quantum of direct oil demand at this point," they said.
(Also read: Rupee in free-fall; plunges to 57.33 against dollar)
The rupee plunged to a new low of 57. 33 on Friday due to purchases by oil and gold importers, as well as global risk aversion that has sent investors fleeing to safe havens such as the US.
The move will also smoothen market volatility caused by current dollar purchases by oil companies which is done through competitive bidding by banks and can lead to price disruptions.
Under the RBI’s move, oil companies can carry on with dollar purchases for the remaining 50 percent of their needs via the current competitive bidding system.
Oil firms are the largest buyers of dollars in the domestic currency market.
(With inputs from Thomson Reuters)